How Aadhaar increased access and reduced corruption

14/01/2016

India increased access and reduced corruption in public services by providing unique digital identification or Aadhaar to one billion people in five years, the World Bank says.

Indians are using their digital IDs called Aadhaar to open bank accounts, monitor attendance of civil servants, and identify recipients of government subsidies, noted the new ‘World Development Report 2016: Digital Dividends,’ released on Thursday.

“In public health services, simple SMS messages have proven effective in reminding people living with HIV to take their lifesaving drugs,” said the 350 plus page report that was two years in the making by a 15 member team led by co-directors, Deepak Mishra and Uwe Deichmann.

However, the report noted that while the internet, mobile phones and other digital technologies are spreading rapidly throughout the developing world, the anticipated digital dividends of higher growth, more jobs, and better public services have fallen short of expectations.

As many as 60 percent of the world’s population remains excluded from the ever-expanding digital economy with the benefits of rapid digital expansion skewed towards the wealthy, skilled, and influential around the world.

In addition, though the number of internet users worldwide has more than tripled since 2005, four billion people still lack access to the internet.

“The digital revolution is transforming the world, aiding information flows, and facilitating the rise of developing nations that are able to take advantage of these new opportunities,” said Kaushik Basu, World Bank Chief Economist.

To deliver fully on the development promise of a new digital age, the World Bank suggested two main actions that the report calls analog complements to digital investments.

These are closing the digital divide by making the internet universal, affordable, open, and safe and strengthening regulations that ensure competition among business, adapting workers’ skills to the demands of the new economy, and fostering accountable institutions.

China has the largest number of internet users, followed by the US, with India, Japan, and Brazil filling out the top five.

The world’s offline population is mainly in India and China, but more than 120 million people are still offline in North America.

With the internet enabling more products to be exported to more markets, often by newer and younger firms, the report noted firms in India, Jamaica, and the Philippines have captured a share of global markets for services ranging from traditional back-office services to long-distance online tutoring.

The internet’s ability to reduce transaction costs increases opportunities for people who face barriers in finding jobs or productive inputs. This promotes inclusion for women, for persons with disabilities, and for people in remote areas, the report said.

The Indian state of Kerala, for example, set up the Kudumbashree project to outsource information technology services to cooperatives of women from poor families; 90 percent of the women had not previously worked outside the home.

The internet is also encouraging more cross-border exchanges of goods and services, allowing consumers and firms to bypass national borders.

But cross-border issues-such as barriers to data flows and uncoordinated intellectual property rights regimes-are impairing the growth of internet firms and robbing consumers of gains from increased digital trade.

The small scale imposed by cross-border barriers may also partly explain why e-commerce firms are often losing money in Africa while being profitable in China and India, the report said.